Changes to the Patreon Billing Model

07Dec

So, I awoke this morning to find a bit of a bombshell from Patreon awaiting me in my inbox. You will soon be hearing directly from Patreon about this, but I’d prefer you learn about it from me first. Here’s what Patreon wants me to tell you:

In the past, I was covering Patreon’s 5% fee and all of the processing fees in full for all of my patrons. This meant that every month I saw anywhere from 7-15% of my earnings taken out to cover those processing fees.

Starting December 18th, Patreon will apply a new service fee of 2.9% + $0.35 to each of your individual pledges. This service fee helps keep Patreon up and running and standardizes my processing fees to 5%.

This ensures that creators like me keep more earnings in order to continue creating high-quality content. I hope you understand and continue your pledges on Patreon. You can read even more about the service fee here.

Note that these new fees apply on a per-article basis. In other words, those of you who have pledged $1.00 per article will now be paying $1.38 per article in real terms.

I’m not at all happy about this change, which is uniquely damaging to the very model this blog uses: of fairly small pledges given on a per-milestone basis. Instead of collecting 7 to 15 percent in fees for credit-card processing, Patreon will now be collecting 37.9 percent from those of you pledging $1 per article. This is all rather disappointingly disingenuous; the obvious question to ask is why the service fee should be collected on each individual per-post pledge instead of on the monthly lump sum which is actually submitted to the credit-card companies for processing. I have to assume on this basis that this change has more to do with “keeping Patreon up and running” than it does with “standardizing my processing fees.” If Patreon needs to increase their cut to stay viable, fair enough, but this is not a terribly transparent way of approaching the problem.

That said, there are some things we can do. Patreon isn’t planning to institute this change until December 18, so there’s still time to write to their customer-service department and/or to Jack Conte, CEO, and share — politely, please! — your feelings about it. If they get enough heat for it, perhaps they might consider a mid-course adjustment.

Assuming, though, that that doesn’t happen:

While I do share Patreon’s hope that some of you will be willing to pay the increased fees, I do understand that everyone has different economic circumstances and places a different value on the material I write, and I will certainly not blame any of you who feel the need to make changes of your own on the basis of what I’ve just shared here. As a patron, you can avoid seeing your monthly charge increase by adjusting your pledge to account for the new processing fees. Those of you currently pledging $1.00 per article, for instance, will want to change that to 62¢ per article (Or not: Alan informs us below that Patreon will no longer accept pledge amounts of less than $1.00. The best thing to do in this situation is probably to cap your monthly spending at $3.00. They just don’t make things easy on us, do they?); those of you pledging $2.00 will want to change that to $1.59; etc. (I’m sure you’re all more than capable of doing the math for yourselves.)

Another possibility, especially if you’d like to see more of your pledge go to me and less to Patreon, is to make a per-article pledge equal to what you’d like to spend for the four articles I normally publish per month. After you do this, set a monthly cap of the same amount on your spending. This will ensure that the processing fee is only collected once, although it does carry with it the risk of paying for articles I haven’t written if, as has very rarely happened in the past, I can’t manage to publish four articles in a given month for one reason or another. (I will always be sure to let you know if and when that’s going to happen, so you can adjust your pledges accordingly if you wish.)

From my side, an obvious alternative is to switch to a flat monthly billing model. I’m reluctant to do so, however, both because it will afflict everyone with the risk I’ve just described in the previous paragraph and — being totally honest here — because it has the potential to be hugely disruptive to what’s become a steady income stream that I rely on.

But I’ll be in touch before December 18, so there’s no need for any of us to make any hasty changes right now. In the meantime, I’d appreciate your thoughts about what this change means to you and how I might minimize its impact on you and everyone else.

Thank you so much for your support over the years! You remain the only reason I can do the work I love most.

(Update, December 8, 2017: Since I all but accused Patreon of being crooks in the post above, I should perhaps share what they’ve finally clarified to be their ostensible real rational for these changes. Some Patreon creators — I’m not among them — make some of their content available only to those who have pledged their support. Because patrons have always been billed at the end of the month, it was possible to make a pledge, consume all that juicy content behind the paywall, then delete the pledge before the bill came due. Patreon wants to prevent this behavior by switching to a model where patrons are billed immediately upon pledging, and continue to be billed immediately thereafter. In other words, when I publish a new article after December 18 backers will be billed right away for that single article alone. This would account for the exorbitant transactions fees on small pledges.

It’s hard for me to imagine, however, that there are enough devious people abusing the existing system to justify this change; based on my life experience, most people are of basically good faith, and most on Patreon in particular just really, earnestly want to help fund what they believe to be worthwhile creative work. So, given that this is effectively destroys the very economies of scale that make Patreon worthwhile in the first place, it rather strikes me as using a bazooka to blow away that fly that’s crawling around your nose. If this behavior is really such a problem — and I’ve certainly never seen it mentioned as such by any actual creator — there are other ways to head it off, such as billing only the first transaction immediately. Personally, I find that most people willing to work that hard to cheat the system tend to be pretty miserable anyway, so I’d just let them be.

I do suspect that another, less public motive may be to drive creators and patrons away from per-milestone pledges and toward flat monthly subscriptions which will deliver a more predictable income stream to the company. But that’s just speculation…)

16 Responses to Changes to the Patreon Billing Model

Alan

December 7, 2017 at 2:37 pm

A year or two ago Patreon changed the minimum pledge to $1.00; it won’t accept values smaller than that. That pissed me off incredibly, as I had some people backed at “$0.50 per comic page” or similar. The old pledges are still valid, but I can’t modify them. Add in this most recent change, and I may end up bailing on the site entirely.

Perhaps patreon could use a payment processor that supports a micropayment fee system. For example, in the UK, you can opt to pay 5% + 5p per transaction. If you’re selling £1/$1 apps, for example, this is _much_ cheaper than the usual 3% + 20p fee.

This looks like the exact model Paypal uses, isn’t it? Not surprising, and yes it would be nice if creators didn’t have to eat processing fees as a cut of their income, but yeah, I wish they would charge the fee on the lump sum.

Thanks for the update and suggestions on how not to get hosed by Patreon, when we all really just want to support you. Please keep us updated if there are any other payment changes or solutions that work better for you – e.g. another alternative to Patreon that works as well for you!

Thanks for your support. If Patreon doesn’t at least come up with a partial solution to this issue in response to all the blowback — and very possibly even if they do — I’m going to be looking seriously into alternative funding methods. I’m just not sure I can continue to trust my livelihood to a company that acts this capriciously, and early inquiries indicate that setting up a local payment system using Stripe may — *may*, mind you — be less difficult than one might think. I’ll have more information about a potential Life After Patreon around here as soon as I know it…

? I don’t know the details, so may not be a good fit for you. And it’s still in it’s trial period anyway. :(

My guess would be Patreon’s had the hard word put on them by PayPal and/or the credit-card companies. Patreon’s model has been to aggregate transactions and then pay them at the end of the month, which cuts down on the fees PayPal and/or the credit-card companies could potentially receive. Their terms probably say you’re not to do this.

Oddly, if you were employed by Patreon, you could probably get around this.

All of which makes you understand why some people like bitcoin. Except for this little detail…

If you stay with Patreon, perhaps you could have a minimum of $4 per article and only push every fourth article through Patreon! (I really like their current model, where there’s just one payment for all the creators you support. Sigh…)

Steph

December 8, 2017 at 7:46 pm

The pledge bait-and-switch happened to me all the time and was a huge problem before they made changes–many creators lost large chunks of their monthly support from people signing up specifically to steal content they had no intention of paying for (often to repost it elsewhere for free.) Seeing the same people signing up and canceling like clockwork every month gets irritating pretty quick.

Whether or not an alternative service supports per-article payments might turn out to be a moot point for many people. As long as per-article payments have an obscene overhead on Patreon – apparently for reasons unrelated to any underlying financial transactions being performed – I have to consider switching to a per-month lump sum payment, anyway. If I’m going to do that then I might as well pledge via another service.

If Jimmy starts using another service that seems reasonable to him then I’ll switch to that service because he’s the only creator I’m currently supporting via Patreon.

The update from Patreon doesn’t seem to satisfactorily address the problems the service had. It seems fundamentally broken to have a business model that allows people to access paid content then walk away without paying. Their solution to this is to impose fees per transaction but it’s not clear to me if those are virtual transactions that patrons get billed for at the end of the month, or if they are immediately charged via a payment provider. Their FAQ doesn’t really help with this.

I wonder if the fees originate with an accounting service provider that charges a fee per transaction in their system, regardless of whether or not there is a corresponding charge to a credit/debit card or payment provider.